Are Blockchain & Distributed Ledger Synonyms?
Many people out there think that “blockchain” and “distributed ledger technology” (DLT) refer to the same thing. And although they are closely related, they’re not the same.
Yes, it’s confusing and maybe frustrating, especially if you feel like you’re starting to wrap your head around the whole blockchain concept. But it’s actually quite simple to distinguish the meanings of the two terms.
In fact, that’s what we’ve dedicated this post to - explaining the difference between the terms “blockchain” and “distributed ledger technology”.
Busting Out the Dictionary
A very simple way to understand the two is to treat the two terms like a category and subcategory. Let’s illustrate this with brands and products. There are sports car and Corvettes, and there are running shoes and Nike trainers. All Corvettes are sports cars, but not all sports cars are Corvettes. All Nike trainers are running shoes but not all running shoes are Nike trainers.
The same goes for blockchains and distributed ledgers. All blockchains are distributed ledgers but not all distributed ledgers are blockchains. To solidify the definitions, it’s a good idea to reiterate the distributed ledger and blockchain definition.
Distributed Ledger Technology Definition: DLT is an umbrella term to describe a database that is consensually shared and synchronized across network spread across multiple sites, institutions and geographies. DLTs can include blockchains and there are also DLTs that are not blockchains – examples include IOTA and Hashgraph which are not blockchains.
Blockchain Definition: A distributed ledger in which transactions are recorded chronologically in blocks that are linked or chained together using cryptographic functions to previous blocks. Hence a blockchain is the complete chain on all blocks ever published onto the blockchain. All blocks are replicated on the participating nodes. Hence blockchain is a replicated ledger of records on distributed or decentralized nodes where blocks are appended to previous blocks forming a continuous chain. The ledger can be publicly available or it can be on a private, or a consortium blockchain of partners. Bitcoin and Ethereum are all examples of blockchains.
With that said, blockchains have rapidly become the most popular and recognized form of distributed ledger technology out there. That’s one of the reasons why the two terms seem to be used so interchangeably.
Why the Distinctions Matter
It’s important to know the difference between the two terms, not only because of their different meanings, but also because of their usage. Take structure into account, for example.
A distributed ledger is decentralized (just like a blockchain) and there are nodes which replicate and save identical data. A blockchain does the same, however, as its name suggests, that information must be stored within a block. Non-blockchain DLT doesn’t have to store recorded information within a block at all, also known as blockless.
Another reason why this distinction is important comes from the fact of how different cryptocurrencies run. In fact, not all cryptocurrencies need to run on blockchain. IOTA is one such example. A cryptocurrency designed for the Internet of Things (IoT) with a nearly $4 billion value, IOTA runs on a distributed ledger technology known as a “Tangle”.
Tangle works by linking transactions to each other in a big web as opposed to a chain of blocks, and hopes to eliminate the need for mining and transaction fees. It is an example of a new DLT that is not a blockchain, and a good example as to why the terms blockchain and distributed ledger technology shouldn’t be confused.
Getting the Names Right
So there you have it - an explanation on the differences between blockchain and distributed ledger technology. Although they revolve around similar concepts, they’re not at all the same. And as the industry progresses, we’ll start to see more examples of how separate the two are, as startups and enterprises dabble with different forms of either technology. So stay tuned for more developments and explanations - there’s a lot more to learn and absorb!